What do I do with my pension once I leave my job?

Updated: Jul 15, 2020

Locked-In Retirement Account (LIRA) is a rolled-over retirement account. A LIRA allows you to roll over money from a pension account after you leave your job.

You can’t contribute to your account once it’s converted to a LIRA, but you do have control over the investments. If you quit a job at which you’ve got a pension (or if you get laid off from a job), your pension will be converted to a LIRA.

At retirement, LIRAs can be used to purchase retirement income (through LIFs, which are similar to RRIFs) or converted into an annuity. Like an RRSP, a LIRA must be closed by December 31 of the year that you turn 71.

When you open a LIRA the money you invest is quite difficult to withdraw. This is great for those of us who need a little help with self-restraint. Savvy investors will also like that they can manage the funds themselves rather than having to rely on their former company to be good stewards of their money.

However, you do want to watch out for high management fees charged on LIRAs - these diminish the amount you save. Some traditional brick and mortar banks charge high fees for LIRA accounts. You may avail to lower fee LIRAs by opening or transferring your LIRA to an online investment provider.

Regulations vary from province to province, when it comes to things like when and how the money can be withdrawn. That can make planning for retirement a bit of a headache.

And while it's a benefit for those who are spend-a-holics to not have easy access to their money, it can be a huge drawback for those who are in dire need of funds. In cases of severe financial hardship, LIRA funds can sometimes be used, but the conditions to do so vary depending on province. LIRA funds are not allowed to be used for a down payment on a house or for education.

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